Tuesday, April 14, 2015

Service Charge

The systematic attack on the poor consumer by the authorities and the businesses is a concern which should not be taken lightly. The service charge is a virus.

The story of the service charge started with the imposition of the service tax in 1975. The service tax is the precursor to the current goods and services tax imposed on 1 April 2015. The GST extends the indirect tax to goods after having restricted itself to services. It was the wisdom of the government of the day that a value-added tax such as the GST is very difficult to impose in a society like Malaysia because of the varying structure of commerce and businesses as well as education. So the decision to cut off the tax for small businesses and only restricting them to hotels and restaurants which were assumed to be run orderly by a hotel or restaurant manager with accountants and lawyers to assist them.

But, of course, once the government has sanctioned a way for itself and businesses to impose a sum of money on the consumer which has very little to do with the food or drink or even service, the government has created a whole new avenue for all sorts of charges to be imposed.

In some restaurant tradition, the tips to the staff are taken from the towels, peanuts and tea that they serve. This was understood by the restaurant owners and the workers. With the advent of the service tax, for restaurants that were not supposed to impose the service tax, they created a new entry called service charge. This service charge could be imposed in lieu of the towels, peanuts and tea. Worse, the service charge could also be imposed on top of the towels, peanuts and tea.

The most recent adaptation of the charging system is that there is a service charge and the service tax is called government tax, because they may have too many customers asking why there are two service fees.

The biggest problem of the current GST is that it is reawakening everybody to the same old world of how the government can collect more taxes and how businesses can abuse the system alongside it. The government is being badly advised and the civil servants have very elementary knowledge of how to tax properly without damaging the economy. To make a bad idea work, we now have the enforcement agencies newly hiring ignorant fresh officers to harass businesses that are not compliant with the GST laws. At the same time, businesses are now having a great time imposing GST or some other charges on the poor consumer whether they are supposed to or not. The exemptions are an art in themselves, and the consequence of this confusion will be that everything will now be charged more.

The consequence of this confusion is a major economic slowdown as investors cannot read the future. This can have major political implications.